Across the African continent, the potential is ripe for a clean energy revolution. Globally, clean energy technology has developed at a rapid rate and technology costs have plummeted – so much so that a predominantly clean energy future that brings energy access to all is definitely possible and in some cases even profitable.
Africa has within its reach a future that creates a homegrown, sustainable, clean energy economy that keeps jobs and money on the continent. Not only will this help prevent the harms and pollution of a fossil-fuel-intensive economy, but it can also save significant amounts of money on energy costs, improve access to reliable power and create employment.
Africa’s move towards a cleaner energy mix was certainly highlighted in most interviews carried out in our studio at African Utility Week 2016 but it would seem that clean energy developers are still coming up against a number of challenges including finance applications, skills and legislation.
Legislation to make energy projects happen
Rainer Ruehl, Vice President Market Development Africa, Siemens spoke about gas to power and described how it would be Africa’s fuel of choice for “decades to come” as it can be produced in very short time frame at a very reasonable price. It is also cleaner than coal which is widely used across Africa. However, the price for gas is being traded in US$ which makes more an expensive purchase when paying with the majority of Africa’s currencies. In addition to this, infrastructure for gas transmission if often lacking and developments often don’t receive the necessary financial investment. Ruehl says that it is up to the government to create legislation that will “make development happen.” He adds that a legal framework must be in place to provide an attractive business environment for foreign investors.
Alignment of public and private sectors
Izael da Silva, Director-Research Centre, Strathmore University agrees that government, private sector and academia must be aligned to further development in renewables. To have a wider and lasting impact, this collaboration is critical, he explained.
He explained that finance is a major challenge for renewable energy development in Africa due to extremely high interest rates at local banks and that foreign loans often prove to be just as expensive. Da Silva recommends taking a more innovative approach and approach and applying for finance with financial institutions like Agence Française de Développement (AFD) which has come up with the Green credit line which provides commercial banks with an incentive to explore the renewable energy and energy efficiency markets. He highlights the fact that KfW, UKAid, Worldbank have put together a package to help mitigate project risks which can be a real game changer for developments.
Innovation around project finance
Rentia van Tonder, Head: Renewable Energy, Power & Infrastructure, Standard Bank said that perceived risk can be a challenge for energy projects and recommends that public and private sectors should co-operate more to find innovative ways to finance grid development.
Ana Hajduka, Founder & CEO, Africa GreenCo agreed that perceived risk does stand in the way of energy development in Africa and has come up with an innovative way of overcoming this: channelling new sources of funding to renewable projects.
She says that the solution is looking at pooling risks across countries on a regional basis and aggregating projects and selling the offtake into power pools through off-takers. She explains that it is a new vehicle through which the difficulties of bankable projects could be overcome. She lists the benefits of the regional integration power sector development during the interview and says that the optimisation of resources on a regional basis is the way forward. “A pooled risk structure might provide certainty for cross border projects to come on board.
There is an increasing strength of power pools in the African market and any attempt to liquefy that market is the way forward. A focus on power pools is key.”